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Somewhat related question: does anyone know how many yuan there are? That is, how many have been issued in total by China’s central bank(s)? Are such figures ev

by _iyig 7y ago

Somewhat related question: does anyone know how many yuan there are? That is, how many have been issued in total by China’s central bank(s)? Are such figures even made public, or is it a matter of detective work and estimation, perhaps funded by outside private investors? Needless to say, the ability to issue more currency without anyone knowing you’ve done so (to increase/maintain domestic spending without the unwanted side-effects of inflation, for example) would be a very useful tool in any trade war.

JumpCrisscross 7y ago
> does anyone know how many yuan there are? Money supply is always estimated. Modern monetary systems don't have a single person with a monopoly on creating money. The central bank "prints" a lot money, but so do private banks. (Some systems have a tighter handle on money supply than others. But the measure is always an estimate.)
- ps101 7y ago
  Where and how do "non-central" banks print money?
  - JumpCrisscross 7y ago
    > Where and how do "non-central" banks print money? "If you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account. This also means as you pay off the loan, the electronic money your bank created is 'deleted' – it no longer exists. You haven’t got richer or poorer. You might have less money in your bank account but your debts have gone down too. So essentially, banks create money, not wealth. Banks create around 80% of money in the economy as electronic deposits in this way. In comparison, banknotes and coins only make up three percent. Finally, most banks have accounts with us at the Bank of England, allowing them to transfer money back and forth. This is called electronic central bank money, or reserves." TL; DR Through borrowing. The process is regulated, but not centrally controlled. https://www.bankofengland.co.uk/knowledgebank/how-is-money-created https://www.bankofengland.co.uk/knowledgebank/how-is-money-c...
    - benj111 7y ago
      "So essentially, banks create money, not wealth" Is that not backwards? That £100 that is loaned out, hasn't appeared from the ether, its my £100 that I deposited. In some real sense I no longer have £100, I have a promise to pay me £100. So I have £100 in wealth, you have £100 cash, which is a subset of wealth. The existence of bank runs would seem to prove that I no longer have £100 cash, and that banks can't create money. Further, the whole idea of capitalism and banking is that people who need money can borrow it to create things that generate wealth. Banks are the conduits to get money from the cash rich, to those who can best use it. If that £100 loan ends up making a better widget, has not the bank in some way generated wealth?
      - JumpCrisscross 7y ago
        > Is that not backwards? No, the Bank or England is not confused about how central banking works. TL; DR Banks don’t lend out deposits. Deposits are created through loans. Reserve requirements limit the rate of loan creation after the fact. Runs happen when depositors stop trusting the numbers created by a specific bank because they don’t think the bank will meet its reserve requirement at the end of the day.
        benj111 7y ago
        No I don't think the BoE is wrong either. What they've stated doesn't seem to fit with my understanding, and what you've said hasn't really clarified things. "how central banking works" I thought we were talking about normal banks???
        perl4ever 7y ago
        "Runs happen when depositors stop trusting the numbers created by a specific bank because they don’t think the bank will meet its reserve requirement at the end of the day." I don't think that makes any sense as a categorical statement. If a bank is short of reserves, but is solvent, then there's no need to panic. Or if it's insolvent, but you know the FDIC will make you whole. The case where you rationally try to get your money out before other people is when you either know that there will not be enough in total assets for everyone in the long run, or you cannot afford to wait for a liquidity crisis to be over.
  - newvoiceoldphne 7y ago
    Loans.
- comicjk 7y ago
  You are right that no one knows the exact money supply. But banks printing money is a misconception. Private lenders "create" money by fostering trust - I have $N in the bank, even they also loaned 90% * $N to other people. Effectively the same money is counted many times. But they don't have the right to print money the way a central bank does. They can only re-loan money that was deposited by others ("inside money") whereas the central bank creates money truly at will ("outside money").
  - JumpCrisscross 7y ago
    > they don't have the right to print money the way a central bank does Yes, they do. A dollar created by JPMorgan Chase out of a loan wires exactly the same as a dollar created by the Federal Reserve out of purchasing a Treasury. (They both look exactly the same in your bank account and withdraw exactly the same as cash.) Money supply is fascinatingly complex [1]. [1] https://en.wikipedia.org/wiki/Money_supply https://en.wikipedia.org/wiki/Money_supply
    - kgwgk 7y ago
      But when they have loaned out as much as they can, they will only be able to loan more money if they get more deposits (or capital). [Edit: I failed to mentions other sources of financing, including from central banks as lenders of last resort. RobertoG is right.] They cannot create money at will as a central bank can. [Edit: the point stands, the intervention of central banks may be required to inject liquidity when the banks cannot create enough money by themselves and cannot find anyone willing to lend money to them.]
      - RobertoG 7y ago
        You are wrong. After creating money by giving loans, a private bank have to get reserves proportional to the money it has loaned. For this, they got to the inter-bank market or the central bank. The goal of the Central Bank it's to control the interest rate, not the quantity of money. If there are not enough reserves in the inter-bank market, and the Central Bank refuses to supply them, the interest rate will go up. So, if the Central Bank want to control the interest rate, it can't control the quantity of money and vice versa. Modern Central Banks target the interest rate, not the quantity of money. The quantity of money in the economy it's automatically regulated by the level of economic activity.
- roenxi 7y ago
  > Money supply is always estimated. Modern monetary systems don't have a single person with a monopoly on creating money. That actually seems like the sort of hand-wave that the accounting industry exists for the sole purpose of opposing. There are a small number of groups licensed to create money by lending, and it is likely they have very accurate records that are to be made available to financial authorities. It may be that the central banks don't bother to use their power to get an accurate figure, but there isn't much of a question that the quantity of money emitted by the system is a precisely known figure. And most of it only exists electronically.
  - JumpCrisscross 7y ago
    > There are a very small number of groups licensed to create money by lending, and it is likely they have very accurate records that are to be made available to financial authorities Every bank is authorized to create money through lending. These range from large, domestic institutions with modern accounting systems to tiny shops in Italy or Greece overseen by an ECB with dollar liquidity swap lines [1]. The estimates are pretty good. But they must always be remembered to be estimates. [1] https://www.federalreserve.gov/monetarypolicy/bst_liquidityswaps.htm https://www.federalreserve.gov/monetarypolicy/bst_liquiditys...
steventhedev 7y ago
Define "issued". M1 is typically checking accounts and cash. M2 is stocks and things that are easily convertible into money. The rest of the M's are defined similarly, but the exact definitions vary from person to person. M1 is always an estimate for every country on earth because you can't just take a snapshot of every bank's ledger all at the same moment and expect all the money to be there. You lack the necessary time granularity and there's a lot of gray areas like money mid-transfer between banks (missing from one, not yet written in the other), money in a van on its way to being destroyed, money in a van from the mint to a bank, bankruptcy proceedings, etc. To work around that, central banks ask retail and commercial banks to provide monthly balance sheets to prove they are stable, and base estimates off that. The IMF/World Bank do something similar with central banks that are members. The good news is that you can find M1 estimates easily from relatively authoritative sources[0] that are good about citing their sources. [0]: https://fred.stlouisfed.org/series/MYAGM1CNM189N https://fred.stlouisfed.org/series/MYAGM1CNM189N
- _iyig 7y ago
  Thanks for the detailed answer - right on the money, so to speak. Follow-up question: does M1 include funds that are digitally issued from a central to a private bank, such as loans from the Fed to (for example) Wells Fargo? If so, are these funds considered fungible for purposes of digital transfer, such as via the SWIFT Network, or does each dollar / unit of currency have some notion of a traceable serial number as for physical bills? I guess what I'm asking is less a finance question, and more a software question. If a bank in China (or the U.S., or anywhere) sends a SWIFT message of deposit to another bank, to what extent can the recipient verify the chain of trust in the funds' existence all the way back to the central issuing authority? If they cannot, it would seem that any private bank could de facto "print money" central bank-style by issuing fraudulent SWIFT requests. Perhaps they'd get caught, or maybe not, if they colluded with the relevant authorities.
  - steventhedev 7y ago
    Regarding the specific definition of M1, you'll have to research. I'm not a banker or an economist, I'm just remembering a macro econ course from 10 years ago. It's entirely possible that the US Federal Reserve Bank has a different definition of M1 than the People's Bank of China. Money has always been fungible, even nonfiat money. The second you have lenders in society and allow them to back loans using deposits, they effectively create money. The ratio of loans to deposits is called the cash reserve ratio, and it's pretty heavily regulated. As for the trust question, the answer is in your question. Swift and other interbank settlement systems are independent (or co-owner) organizations that require a massive security deposit to explicitly handle the situation where a bank says "transfer 1000 to A with account with us from account B in your bank" where the transfer wasn't backed or authorized or anything like that. It's important to note that there are both pull and push systems. ACH is an example of a system that can pull. All of this is because banks don't trust each other especially if they aren't beholden to the same regulatory authority.

by _iyig 7y ago

JumpCrisscross 7y ago

> does anyone know how many yuan there are? Money supply is always estimated. Modern monetary systems don't have a single person with a monopoly on creating money. The central bank "prints" a lot money, but so do private banks. (Some systems have a tighter handle on money supply than others. But the measure is always an estimate.)

ps101 7y ago
Where and how do "non-central" banks print money?
- JumpCrisscross 7y ago
  > Where and how do "non-central" banks print money? "If you borrow £100 from the bank, and it credits your account with the amount, ‘new money’ has been created. It didn’t exist until it was credited to your account. This also means as you pay off the loan, the electronic money your bank created is 'deleted' – it no longer exists. You haven’t got richer or poorer. You might have less money in your bank account but your debts have gone down too. So essentially, banks create money, not wealth. Banks create around 80% of money in the economy as electronic deposits in this way. In comparison, banknotes and coins only make up three percent. Finally, most banks have accounts with us at the Bank of England, allowing them to transfer money back and forth. This is called electronic central bank money, or reserves." TL; DR Through borrowing. The process is regulated, but not centrally controlled. https://www.bankofengland.co.uk/knowledgebank/how-is-money-created https://www.bankofengland.co.uk/knowledgebank/how-is-money-c...
  - benj111 7y ago
    "So essentially, banks create money, not wealth" Is that not backwards? That £100 that is loaned out, hasn't appeared from the ether, its my £100 that I deposited. In some real sense I no longer have £100, I have a promise to pay me £100. So I have £100 in wealth, you have £100 cash, which is a subset of wealth. The existence of bank runs would seem to prove that I no longer have £100 cash, and that banks can't create money. Further, the whole idea of capitalism and banking is that people who need money can borrow it to create things that generate wealth. Banks are the conduits to get money from the cash rich, to those who can best use it. If that £100 loan ends up making a better widget, has not the bank in some way generated wealth?
    - JumpCrisscross 7y ago
      > Is that not backwards? No, the Bank or England is not confused about how central banking works. TL; DR Banks don’t lend out deposits. Deposits are created through loans. Reserve requirements limit the rate of loan creation after the fact. Runs happen when depositors stop trusting the numbers created by a specific bank because they don’t think the bank will meet its reserve requirement at the end of the day.
      - benj111 7y ago
        No I don't think the BoE is wrong either. What they've stated doesn't seem to fit with my understanding, and what you've said hasn't really clarified things. "how central banking works" I thought we were talking about normal banks???
      - perl4ever 7y ago
        "Runs happen when depositors stop trusting the numbers created by a specific bank because they don’t think the bank will meet its reserve requirement at the end of the day." I don't think that makes any sense as a categorical statement. If a bank is short of reserves, but is solvent, then there's no need to panic. Or if it's insolvent, but you know the FDIC will make you whole. The case where you rationally try to get your money out before other people is when you either know that there will not be enough in total assets for everyone in the long run, or you cannot afford to wait for a liquidity crisis to be over.
- newvoiceoldphne 7y ago
  Loans.
comicjk 7y ago
You are right that no one knows the exact money supply. But banks printing money is a misconception. Private lenders "create" money by fostering trust - I have $N in the bank, even they also loaned 90% * $N to other people. Effectively the same money is counted many times. But they don't have the right to print money the way a central bank does. They can only re-loan money that was deposited by others ("inside money") whereas the central bank creates money truly at will ("outside money").
- JumpCrisscross 7y ago
  > they don't have the right to print money the way a central bank does Yes, they do. A dollar created by JPMorgan Chase out of a loan wires exactly the same as a dollar created by the Federal Reserve out of purchasing a Treasury. (They both look exactly the same in your bank account and withdraw exactly the same as cash.) Money supply is fascinatingly complex [1]. [1] https://en.wikipedia.org/wiki/Money_supply https://en.wikipedia.org/wiki/Money_supply
  - kgwgk 7y ago
    But when they have loaned out as much as they can, they will only be able to loan more money if they get more deposits (or capital). [Edit: I failed to mentions other sources of financing, including from central banks as lenders of last resort. RobertoG is right.] They cannot create money at will as a central bank can. [Edit: the point stands, the intervention of central banks may be required to inject liquidity when the banks cannot create enough money by themselves and cannot find anyone willing to lend money to them.]
    - RobertoG 7y ago
      You are wrong. After creating money by giving loans, a private bank have to get reserves proportional to the money it has loaned. For this, they got to the inter-bank market or the central bank. The goal of the Central Bank it's to control the interest rate, not the quantity of money. If there are not enough reserves in the inter-bank market, and the Central Bank refuses to supply them, the interest rate will go up. So, if the Central Bank want to control the interest rate, it can't control the quantity of money and vice versa. Modern Central Banks target the interest rate, not the quantity of money. The quantity of money in the economy it's automatically regulated by the level of economic activity.
roenxi 7y ago
> Money supply is always estimated. Modern monetary systems don't have a single person with a monopoly on creating money. That actually seems like the sort of hand-wave that the accounting industry exists for the sole purpose of opposing. There are a small number of groups licensed to create money by lending, and it is likely they have very accurate records that are to be made available to financial authorities. It may be that the central banks don't bother to use their power to get an accurate figure, but there isn't much of a question that the quantity of money emitted by the system is a precisely known figure. And most of it only exists electronically.
- JumpCrisscross 7y ago
  > There are a very small number of groups licensed to create money by lending, and it is likely they have very accurate records that are to be made available to financial authorities Every bank is authorized to create money through lending. These range from large, domestic institutions with modern accounting systems to tiny shops in Italy or Greece overseen by an ECB with dollar liquidity swap lines [1]. The estimates are pretty good. But they must always be remembered to be estimates. [1] https://www.federalreserve.gov/monetarypolicy/bst_liquidityswaps.htm https://www.federalreserve.gov/monetarypolicy/bst_liquiditys...

steventhedev 7y ago

Define "issued". M1 is typically checking accounts and cash. M2 is stocks and things that are easily convertible into money. The rest of the M's are defined similarly, but the exact definitions vary from person to person. M1 is always an estimate for every country on earth because you can't just take a snapshot of every bank's ledger all at the same moment and expect all the money to be there. You lack the necessary time granularity and there's a lot of gray areas like money mid-transfer between banks (missing from one, not yet written in the other), money in a van on its way to being destroyed, money in a van from the mint to a bank, bankruptcy proceedings, etc. To work around that, central banks ask retail and commercial banks to provide monthly balance sheets to prove they are stable, and base estimates off that. The IMF/World Bank do something similar with central banks that are members. The good news is that you can find M1 estimates easily from relatively authoritative sources[0] that are good about citing their sources. [0]: https://fred.stlouisfed.org/series/MYAGM1CNM189N https://fred.stlouisfed.org/series/MYAGM1CNM189N

_iyig 7y ago
Thanks for the detailed answer - right on the money, so to speak. Follow-up question: does M1 include funds that are digitally issued from a central to a private bank, such as loans from the Fed to (for example) Wells Fargo? If so, are these funds considered fungible for purposes of digital transfer, such as via the SWIFT Network, or does each dollar / unit of currency have some notion of a traceable serial number as for physical bills? I guess what I'm asking is less a finance question, and more a software question. If a bank in China (or the U.S., or anywhere) sends a SWIFT message of deposit to another bank, to what extent can the recipient verify the chain of trust in the funds' existence all the way back to the central issuing authority? If they cannot, it would seem that any private bank could de facto "print money" central bank-style by issuing fraudulent SWIFT requests. Perhaps they'd get caught, or maybe not, if they colluded with the relevant authorities.
- steventhedev 7y ago
  Regarding the specific definition of M1, you'll have to research. I'm not a banker or an economist, I'm just remembering a macro econ course from 10 years ago. It's entirely possible that the US Federal Reserve Bank has a different definition of M1 than the People's Bank of China. Money has always been fungible, even nonfiat money. The second you have lenders in society and allow them to back loans using deposits, they effectively create money. The ratio of loans to deposits is called the cash reserve ratio, and it's pretty heavily regulated. As for the trust question, the answer is in your question. Swift and other interbank settlement systems are independent (or co-owner) organizations that require a massive security deposit to explicitly handle the situation where a bank says "transfer 1000 to A with account with us from account B in your bank" where the transfer wasn't backed or authorized or anything like that. It's important to note that there are both pull and push systems. ACH is an example of a system that can pull. All of this is because banks don't trust each other especially if they aren't beholden to the same regulatory authority.